Here’s What Hedge Funds Think About Meredith Corporation (MDP)

“The global economic environment is very favorable for investors. Economies are generally strong, but not too strong. Employment levels are among the strongest for many decades. Interest rates are paused at very low levels, and the risk of significant increases in the medium term seems low. Financing for transactions is freely available to good borrowers, but not in major excess. Covenants are lighter than they were five years ago, but the extreme excesses seen in the past do not seem prevalent yet today. Despite this apparent ‘goldilocks’ market environment, we continue to worry about a world where politics are polarized almost everywhere, interest rates are low globally, and equity valuations are at their peak,” are the words of Brookfield Asset Management. Brookfield was right about politics as stocks experienced their second worst May since the 1960s due to escalation of trade disputes. We pay attention to what hedge funds are doing in a particular stock before considering a potential investment because it works for us. So let’s take a glance at the smart money sentiment towards Meredith Corporation (NYSE:MDP) and see how it was affected.

Is Meredith Corporation (NYSE:MDP) a great investment now? The smart money is taking a pessimistic view. The number of long hedge fund positions were trimmed by 1 recently. Our calculations also showed that mdp isn’t among the 30 most popular stocks among hedge funds.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.

Michael Price MFP Investors

Michael Price of MFP Investors

Let’s review the new hedge fund action surrounding Meredith Corporation (NYSE:MDP).

What does smart money think about Meredith Corporation (NYSE:MDP)?

Heading into the second quarter of 2019, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -8% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards MDP over the last 15 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with MDP Positions

Among these funds, Royce & Associates held the most valuable stake in Meredith Corporation (NYSE:MDP), which was worth $133.3 million at the end of the first quarter. On the second spot was Ariel Investments which amassed $77.6 million worth of shares. Moreover, GAMCO Investors, Citadel Investment Group, and MFP Investors were also bullish on Meredith Corporation (NYSE:MDP), allocating a large percentage of their portfolios to this stock.

Since Meredith Corporation (NYSE:MDP) has experienced falling interest from the smart money, it’s easy to see that there exists a select few funds that decided to sell off their full holdings last quarter. Interestingly, Parag Vora’s HG Vora Capital Management cut the biggest investment of the “upper crust” of funds tracked by Insider Monkey, comprising an estimated $13 million in stock. Jim Simons’s fund, Renaissance Technologies, also dumped its stock, about $2.4 million worth. These moves are intriguing to say the least, as total hedge fund interest dropped by 1 funds last quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Meredith Corporation (NYSE:MDP). These stocks are First Bancorp (NYSE:FBP), Cirrus Logic, Inc. (NASDAQ:CRUS), QTS Realty Trust Inc (NYSE:QTS), and Advanced Disposal Services, Inc. (NYSE:ADSW). This group of stocks’ market values are closest to MDP’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
FBP 18 246590 -2
CRUS 17 226684 -3
QTS 22 371693 6
ADSW 12 123110 -3
Average 17.25 242019 -0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 17.25 hedge funds with bullish positions and the average amount invested in these stocks was $242 million. That figure was $295 million in MDP’s case. QTS Realty Trust Inc (NYSE:QTS) is the most popular stock in this table. On the other hand Advanced Disposal Services, Inc. (NYSE:ADSW) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Meredith Corporation (NYSE:MDP) is even less popular than ADSW. Hedge funds dodged a bullet by taking a bearish stance towards MDP. Our calculations showed that the top 20 most popular hedge fund stocks returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately MDP wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); MDP investors were disappointed as the stock returned -1.7% during the same time frame and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market so far in the second quarter.

Disclosure: None. This article was originally published at Insider Monkey.